As a homeowner in the Great Lakes State, your home is not merely a place to live, but also a valuable asset. You may wish to sell or refinance it over the course of your life. Unfortunately, mechanic’s liens placed on your property can impede these efforts and diminish the value of your home. Liens are essentially clouds on your home title, usually filed by contractors or subcontractors who claim that they are owed money for work done on the property.
Imagine, for example, an electrician who claims that she fixed your lighting without receiving compensation from you, or a brick company that claims it laid bricks in your driveway but was never paid the contract balance. These entities can potentially sue you for breach of contract. But they can also secure their financial interests without filing a formal lawsuit against you in Michigan’s Circuit Court, by filing a simple lien.
What exactly is a mechanic’s lien, and what can you do if one is placed on your Michigan home?
As a Michigan homeowner, you have hopefully never encountered a mechanic’s lien. These legal documents are somewhat obscure, and many homeowners have not heard of them at all.
To start, you may wish to know what the form looks like. A Michigan mechanic’s lien is a short document, generally just a few pages long. You can easily find model firms on various law firm and bar association websites throughout Michigan. A model form is actually included in the Construction Lien Law itself, meaning that the legislature has laid out all of the elements a lienor would need to fill in.
In a nutshell, a lien is a document that gets publicly filed in the Michigan county clerk’s office where the relevant property is located. You may know that there are 83 counties in Michigan; the contractor would file the lien in the county where your home is (not necessarily the county where his or her business is based). Once filed, the lien creates a situation where your home title is subject to the contractor’s stated financial interest in it.
To understand how a lien functions, consider this example: You hire a plumbing company to install new pipes in your basement in your suburban home in Ann Arbor. After the contractor finishes the work, you have a payment dispute. The company tries to charge you $5,000 more than you had agreed to in the original contract, or claims that you asked for additional work, when you did not.
You refuse to pay the additional sum. The contractor could then file a $5,000 mechanic’s lien with the local Michigan county clerk. (Ann Arbor is located in Washtenaw County). This essentially means that anyone who buys your property would buy it subject to owing the contractor that $5,000. This will make it difficult to sell or refinance the property. Contractors therefore use liens as a means of incentivizing property owners like you to settle with them.
Under the Michigan statute, the person or entity filing the lien must enter on the document the company’s name, the owner’s name, the location of the property, and the amount of money still due, among other pieces of information. The lienor must also describe the labor or material provided (in other words, how did the contractor improve your property?).
Now that you have a basic understanding of what liens are and what they do, you can consider how to fight them.
The best way to fight a lien is to avoid it altogether. In most situations, you should be able to avoid the nuisance of having mechanic’s liens filed on your property by engaging in a reasonable negotiation with your Michigan contractor before the lien is filed. Liens are typically a sign of frustration and a relationship that has broken down. The contractor believes you are either ignoring payment requests or have no intention of entering into a good faith negotiation.
If your contractor asserts that he or she is owed an extra sum of money, do not just ignore the phone calls or invoices. While you might think that this “strong signal” will convince your contractor to simply go away, the contractor might view it as a sign of disrespect, prompting a lien or a lawsuit or both.
You and the contractor may have a good faith disagreement about whether certain work was part of the contract, or about the quality of that work. Rather than ignoring the issue, have a frank discussion about it, or consider going to mediation.
In mediation, a third-party neutral (often an attorney or individual with experience in the construction industry) can help you and your contractor to negotiate a fair settlement.
In both negotiation and mediation, you should be open to creative settlement strategies. Rather than paying a lump sum, for instance, perhaps you could schedule payments over time. Rather than a monetary settlement, maybe you could offer the contractor a public endorsement or reference. Rather than fighting in court, you could offer the contractor discounted payment in exchange for a limited scope of ongoing work. The possibilities depend on the facts of the situation.
Of course, there are legal remedies available to Michigan homeowners to fight a lien after it is filed. However, you are likely to save time and money if you find a way to settle the payment dispute with the contractor. This does not mean you need to give into all of the contractor’s demands, but it does mean that you should keep in mind the costs of legal action and do your best to avoid it.
If a lien is placed on your property, it will be helpful to familiarize yourself with the statute that governs liens in Michigan. Liens are governed by M.S.A. § 570.1110 et seq. Like with most states’ lien statutes, Michigan’s Construction Lien Law is complex. It contains many rules and exceptions, depending on the type of property involved and the work performed. But there are some general important concepts to remember:
How can you remove a lien once it’s filed? There are several strategies to get the lien removed in Michigan. The first, as mentioned, is to negotiate a resolution with your contractor.
A second option is to obtain what’s known as a “lien bond,” through a surety company. The bond essentially guarantees payment to the contractor in the amount of the lien if the contractor is successful on the legal claims, but also removes the lien from your property record.
A third option is to petition a court (specifically, the Michigan Circuit Court serving your county) to remove the lien. Your grounds for removing the lien could include that the contractor never did the work that the lien claims, or that the work was already compensated. This would require you to present evidence in support of your allegations, possibly through expert testimony.
You can also attack legal deficiencies in the contractor’s lien. The most common deficiency for Michigan liens involves the strict deadlines for filing. The lien must be filed no later than 90 days from the last day of the month in which labor or materials was last provided to the property. This is a relatively short timeline, and courts will strictly enforce it. The language of the statute is harsh: “the right of a contractor, subcontractor, laborer, or supplier to a construction lien created by this act shall cease to exist unless [unless a lien is filed] within 90 days.”
There is one other important deadline that contractors must follow. The lien is valid for only one year after filing. Within that time, the contractor must file a lawsuit to “enforce” or “foreclose” on the lien. If they fail to do so, the lien will expire.
Keep these deadlines in mind. Often, busy contractors will sit on their rights for too long, in which case Michigan law will no longer permit their liens to be sustained against your property.
Liens are unfortunately a possible result of Michigan home improvement projects. Homeowners should not be overly surprised if they face a lien filed on their property (or at least the threat of such a filing) during or after a construction project.
Fortunately, few contractors in the Great Lakes State wish to actually initiate litigation against a homeowner in order to foreclose on a lien. Litigation is time-consuming and expensive. Most contractors would prefer to settle with you quickly for a reasonable sum. Keep this leverage in mind as you explore the legal options available to you under Michigan law.
Finally, remember that liens and the laws surrounding them in Michigan can be highly technical. Retaining an attorney with experience in construction or real estate law might be worth your expense, depending on the amount of money in dispute. For more on retaining a Michigan lawyer, check out Guide to Finding an Excellent Attorney.